Bob, an employee of Modern Corp., receives a fringe benefit (in lieu of a salary increase) of $100. Bob is in a 33% tax bracket. The fringe benefit is nontaxable to Bob and is not deductible as an itemized deduction. Bob's after-tax savings from receiving the tax-free benefit is

Bob, an employee of Modern Corp., receives a fringe benefit (in lieu of a salary increase) of $100. Bob is in a 33% tax bracket. The fringe benefit is nontaxable to Bob and is not deductible as an itemized deduction. Bob's after-tax savings from receiving the tax-free benefit is

A) $0.
B) $33.
C) $67.
D) $100.



Answer: B

In September of 2011, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100,000. What is the basis in the new stock she purchased?

In September of 2011, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100,000. What is the basis in the new stock she purchased?

A) $200,000
B) $300,000
C) $800,000
D) $1,100,000



Answer: B

In September of 2011, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100,000. How much of the gain will she recognize?

In September of 2011, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100,000. How much of the gain will she recognize?

A) $ -0-
B) $100,000
C) $800,000
D) $900,000



Answer: A

This year, Jason sold some qualified small business stock that he acquired in 2004. His basis in the stock was $95,000 and he sold it for a $30,000 gain. How much of Jason's gain is taxable?

This year, Jason sold some qualified small business stock that he acquired in 2004. His basis in the stock was $95,000 and he sold it for a $30,000 gain. How much of Jason's gain is taxable?

A) $-0-
B) $15,000
C) $30,000
D) $47,500


Answer: B

The discharge of certain student loans is excluded from income if all of the following are present except for

The discharge of certain student loans is excluded from income if all of the following are present except for

A) the loan must have been made by governmental, educational, or charitable organizations.
B) the loan proceeds must have been used to pay the cost of attending an education institution or used to refinance outstanding student loans.
C) the loan forgiveness must be contingent upon the individual's working for a specified period of time in certain professions.
D) the loan forgiveness is based on age.



Answer: D

Connor owes $4 million and has assets of only $1 million. He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar. Connor has a net operating loss carryover of $2 million. The remaining 75 percent of his debt will be canceled. Connor must recognize income of

Connor owes $4 million and has assets of only $1 million. He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar. Connor has a net operating loss carryover of $2 million. The remaining 75 percent of his debt will be canceled. Connor must recognize income of

A) $0.
B) $1 million.
C) $2 million.
D) $3 million.


Answer: A

For a taxpayer who is not insolvent nor under bankruptcy proceedings, the discharge of debt is generally

For a taxpayer who is not insolvent nor under bankruptcy proceedings, the discharge of debt is generally

A) taxable.
B) nontaxable
C) partially taxable.
D) none of the above.



Answer: A

In 2010 Bronwyn loaned her son, Juan, $10,000 to help him buy a new computer. In 2011, before he repaid the $10,000, Bronwyn told Juan that she was "tearing up" the $10,000 note as a graduation present. How should Juan treat the amount forgiven?

In 2010 Bronwyn loaned her son, Juan, $10,000 to help him buy a new computer. In 2011, before he repaid the $10,000, Bronwyn told Juan that she was "tearing up" the $10,000 note as a graduation present. How should Juan treat the amount forgiven?

A) taxable income in year of loan
B) taxable income in year of forgiveness
C) excludable gift in year of loan
D) excludable gift in year of forgiveness



Answer: D

Melanie, a U.S. citizen living in Paris, France, for the last three years earns a salary of $110,000 in 2011. Melanie's housing costs are $24,000 per year, which is reasonable. How much can Melanie exclude from income?

Melanie, a U.S. citizen living in Paris, France, for the last three years earns a salary of $110,000 in 2011. Melanie's housing costs are $24,000 per year, which is reasonable. How much can Melanie exclude from income?

A) $24,000
B) $92,900
C) $102,036
D) $134,000



Answer: C

Jeremy, an American citizen, earned $200,000 during 2011 while employed in Saudi Arabia. Jeremy is entitled to the maximum foreign-earned income exclusion. Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income. Jeremy may deduct how much in expenses?

Jeremy, an American citizen, earned $200,000 during 2011 while employed in Saudi Arabia. Jeremy is entitled to the maximum foreign-earned income exclusion. Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income. Jeremy may deduct how much in expenses?

A) $0
B) $18,580
C) $21,420
D) $40,000


Answer: C

Jan has been assigned to the Rome office of ABC Corporation. She arrives in Rome on November 1, 2009 and does not return to the U.S. until March 5, 2012. During her stay in Rome, Jan earned $102,000 in 2011. Jan may exclude

Jan has been assigned to the Rome office of ABC Corporation. She arrives in Rome on November 1, 2009 and does not return to the U.S. until March 5, 2012. During her stay in Rome, Jan earned $102,000 in 2011. Jan may exclude

A) $0.
B) $41,000.
C) $82,000.
D) $92,900.



Answer: D

For 2011, the maximum foreign-earned income exclusion is

For 2011, the maximum foreign-earned income exclusion is

A) $91,500.
B) $92,900.
C) $95,000.
D) None of the above.



Answer: B

Tim earns a salary of $40,000. This year, Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is available to reimburse medical expenses. During the year, he is reimbursed $900 for medical expenses. What is the total taxable to Tim this year?

Tim earns a salary of $40,000. This year, Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is available to reimburse medical expenses. During the year, he is reimbursed $900 for medical expenses. What is the total taxable to Tim this year?

A) $37,500
B) $37,600
C) $38,400
D) $40,000



Answer: A

Rick chose the following fringe benefits under his employer's cafeteria plan. Which of his chosen benefits will be taxable?

Rick chose the following fringe benefits under his employer's cafeteria plan. Which of his chosen benefits will be taxable?

A) $150 cash per pay period
B) medical insurance on his family
C) dental insurance
D) group term life insurance of $20,000



Answer: A

Carl filed his tax return, properly claiming the head of household filing status. Carl's employer paid or provided the following to Carl:

Carl filed his tax return, properly claiming the head of household filing status. Carl's employer paid or provided the following to Carl:

Wages $65,000
Fair market value of qualified dependent care services 4,000
Premiums for $50,000 qualified group term life insurance 500
Medical insurance premiums 600

How much of this income should Carl report?


A) $65,000
B) $69,000
C) $69,500
D) $70,100



Answer: A

Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program. How much of the employer-provided tuition is taxable to Ahmad?

Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program. How much of the employer-provided tuition is taxable to Ahmad?

A) $0
B) $4,750
C) $5,250
D) $10,000



Answer: B

Fatima's employer provides a child care center where her two children stay while she works. She pays nothing for this service. If Fatima paid for comparable child care, it would cost $7,200 a year. How much of the child care benefits are taxable to Fatima?

Fatima's employer provides a child care center where her two children stay while she works. She pays nothing for this service. If Fatima paid for comparable child care, it would cost $7,200 a year. How much of the child care benefits are taxable to Fatima?

A) $0
B) $2,200
C) $5,000
D) $7,200



Answer: B

Lindsay Corporation made the following payments to the family of Luke Marshall, an employee who died during the year.

Lindsay Corporation made the following payments to the family of Luke Marshall, an employee who died during the year.

$5,000 for Luke's final paycheck that he failed to collect
$10,000 for accrued vacation days as required by the employment contract
$25,000 for in admiration of Luke's outstanding service to the community

What is the total amount that Luke's family must include in income?


A) $0
B) $5,000
C) $15,000
D) $40,000



Answer: C

Which of the following item(s) must be included in the income of the respective employees?

Which of the following item(s) must be included in the income of the respective employees?

A) ABC Hospital Corporation provides free meals in the hospital cafeteria to employees while on duty in order that they be available for emergency calls.
B) The state of California highway patrol organization provides its officers with a daily meal allowance to compensate them for meals eaten at any location while they are on duty.
C) IBX Corporation requires its employees to work overtime three evenings each year when the company takes inventory. The corporation pays to provide catered dinners on its premises on these evenings.
D) More than one, but not all, of the amounts must be included in income.



Answer: B

Healthwise Ambulance requires its employees to be on 24-hour call and consequently gives them $800 per month housing allowance and a $200 per month food allowance. Ron, an employee of Healthwise, receives a salary of $40,000 per year (this does not include the allowances). Ron will be taxed each year on

Healthwise Ambulance requires its employees to be on 24-hour call and consequently gives them $800 per month housing allowance and a $200 per month food allowance. Ron, an employee of Healthwise, receives a salary of $40,000 per year (this does not include the allowances). Ron will be taxed each year on

A) $40,000.
B) $42,400.
C) $49,600.
D) $52,000.


Answer: D